The massive disruption caused by the COVID pandemic, particularly by the shattering second wave, severely impacted commercial office real estate, including the flexible workspaces, though in the short term. But the fall out of pandemic may well prove to be a blessing for the flexible workspace segment, with the expected rise in demand.
Over the last few years, the flexible workspace segment has made significant strides. Per a recent report flexible office space stock is expected to grow 10-15 pc annually from the current 36 million sq ft in the next three years driven by hybrid space demand, expansion across cities, and sustained funding.
The uncertainty led to a slowdown in leasing activity due to regional lockdowns temporarily delaying occupiers’ plans. Yet, considering the fundamentally strong dynamics of office realty and expected improvement in the pandemic situation in the coming months, office realty, especially flexible workspaces, will show resilience. Despite the apprehensions of office space losing ground given the rising trend of work from home (WFH), the work from the office will coexist with WFH. Office realty will not lose its importance as real estate forms an important asset for the companies from their corporate brand image perspective. Rather, post-pandemic, corporates will be increasingly looking at revitalising their brand.
As part of their strategy to ensure seamless working, businesses will continue to adapt to the fluid nature of work and the evolving work models with flexibility at the core. They will remodel their real estate with improved services and amenities, particularly sustainability and employee well-being. Also, because of the pandemic setback focusing on cost reduction and engaging workspaces providing a dynamic environment, the companies will be increasingly opting for flexible workspaces. Many offices that have terminated their leases will come back to lease flex spaces and managed offices. Especially so, because of the distributive workforce given the hybrid work model and rise in gig workers, businesses will be looking for flexible workspaces with shorter tenured leases.
As we advance, we will see distinct trends in the workspace. Commercial space developers will be keeping flexible workspaces as part of their overall commercial office development. On the other hand, occupiers will take to the hub and spoke model with multiple distributive satellite offices in smaller towns to ensure business continuity and productivity with cost optimisation. The companies will be going in for an asset-light model as part of their real estate portfolio planning. They will go for cost-effective, efficient, and flexible workspaces for lower Capex, flexible leases and customised offerings. The preference will be for office spaces with superior property management and tenant services with a more collaborative and partnership-oriented relationship between tenants and owners. We will also be witnessing the trend of lock-in seats compared to square feet lock-in.
There will be several future growth drivers for flexible workspaces. A major demand booster will come from the growth of IT, BPM, engineering and manufacturing sectors. In addition, the foreseen expansion by technology companies because of the rising demand for AI, robotics, and machine learning will also push flexible working space.
With a distributed workforce, hybrid work taking precedence and hub and spoke models emerging as the latest trend, managed offices are expected to gain the most. While the work plans remain fluid, companies continue to reassess their real estate needs. They are diversifying operational risks by distributing work at more than one location, offering maximum flexibility to its employees. These are customised office spaces taking care of an enterprise’s requirements of office design, fit-outs, amenities and overall operations, so, it can focus on its core business.
Managed office spaces offer tailor-made office solutions according to the companies’ business needs, budget, and branding. These workspaces provide a digitally-enabled work environment, top Grade shared common areas, value-added services and a plethora of amenities. With low or zero upfront Capex, flex spaces are far more structured in terms of threshold limit for space and lease commitment, offering an opportunity to enterprises to scale up.
COVID-19 has put the focus on flexible workplace strategy more than ever. What once used to be an offbeat option has now become mainstream. With enterprises warming up and embracing the concept, managed office spaces is set to drive the post-pandemic flexible workspace market in the future.